Gas Transmission Northwest Corp.

Third Revised Volume No. 1-A

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Effective Date: 01/01/2007, Docket: RP06-407-008, Status: Pending

Third Revised Sheet No. 221 Third Revised Sheet No. 221 : Pending

Superseding: Second Revised Sheet No. 221

TRANSPORTATION GENERAL TERMS AND CONDITIONS

(Continued)

35. PIPELINE INTEGRITY PLAN (PIP) SURCHARGE

35.1 Recoverable Costs: This section sets forth a tracking mechanism

to recover, through a volumetric surcharge, the cost-of-service

effect of Transporter's capital and related operation and

maintenance (O&M) expenditures incurred pursuant to

Transporter's PIP on or after January 1, 2007 and on or before

December 31, 2011 (Tracker Period) by Transporter under the

Pipeline Safety Improvement Act of 2002 and the Commission's

Order on Accounting for Pipeline Assessment Costs in Docket No.

AI05-1-000 (Qualifying Costs). The volumetric surcharges (PIP

Surcharges), if any, may be charged by Transporter for five

years beginning April 1, 2008 (PIP Surcharge Period). The PIP

Surcharge Period shall terminate on March 31, 2013. Qualifying

Costs shall not include costs associated with O&M expenses or

capital additions that are incurred through the ordinary course

of business or costs associated with new expansion facilities.

Qualifying Costs recoverable through the PIP surcharge shall

consist of a pre-tax rate of return of 15% on PIP capital

expenditures (adjusted for associated accumulated depreciation

at the rates provided for in the Stipulation and Agreement of

Settlement in Docket No. RP06-407 and accumulated deferred

income taxes) and the annual depreciation expense associated

with PIP capital expenditures. In addition, the amount

recoverable pursuant to the PIP surcharge shall include the

actual O&M expenses incurred by Transporter pursuant to

Transporter's PIP. Transporter shall separately track all

expenses and invested capital related to Qualifying Costs made

on and after January 1, 2007.

35.2 Limitations: In each of the five years of the Tracker Period,

Transporter may only recover, through the PIP Surcharge,

Qualifying Costs (which will include any Cost Threshold

Credits) that exceed a cumulative cost recovery threshold of

$12 million per year. Total Qualifying Costs incurred in any of

the five years of the Tracker Period which exceed the cost

recovery threshold and are less than or equal to the costs

otherwise recoverable through application of the corresponding

PIP Surcharge Rate Cap are hereafter referred to as "Net

Qualifying Costs" and shall be recovered through a PIP

surcharge collected from customers in the following year. Thus,

to the extent there are Net Qualifying Costs in year one of the

Tracker Period, Transporter may file to establish a PIP

surcharge to recover such costs in year one of the PIP

Surcharge Period. In each of the subsequent years of the

(Continued)